Ever heard of the “Fosbury Flop”? Whether you have or not, if you’ve watched the sport of high jumping anytime in the past 50 years or so, you’ve likely seen it in action; it’s the current “state of the art” practice for maximizing performance in a high-jump competition. So why talk about it on a legal blog?

The newly released 2020 Report on the State of the Legal Market, produced by the Thomson Reuters Legal Executive Institute and the Georgetown Law Center on Ethics and the Legal Profession, uses the “Fosbury Flop” as an analogy for the fundamental shift in the legal market that is well underway. Jim Jones, Senior Fellow from the Georgetown Center and the report’s lead author, argues that law firms and other stakeholders in the legal industry would do well to learn from the example of how the “flop” revolutionized the sport of high jumping.

Prior to 1968, all competitors in high jumping used one particular technique that was considered the standard. When Dick Fosbury set a new Olympic record with his unconventional “flop” method, however, people began to take notice even as they considered his success an outlier. Yet eight short years later, all three medalists at the 1976 Olympics had adopted Fosbury’s new style. In a very short time, the aberration had become the standard.

In today’s legal market, we are seeing a variety of new and different practice models, but collectively they all point to a fundamental shift in the foundations of the legal market. While the market has stabilized over the past decade to produce respectable, though unremarkable, performance for most law firms, there is also mounting evidence that clients, alternative legal service providers (ALSPs), and even many law firms are now operating under a different set of assumptions about how legal services can and should be delivered, consumed and paid for.

The report does not suggest that law firms are on imminently shaking footing. On the contrary, key performance metrics for law firms in 2019 showed incremental improvements for most firms compared to 2018. Demand, worked rates, and attorney headcount all increased compared to the previous year. In fact, noteworthy growth in worked rates (simply the rates that a firm agrees to with particular clients for work on given matters), combined with positive demand performance contributed to average revenue growth of 5.4% for the average law firm in the market.

Growth in Key Practice Areas

Key practice areas like litigation, corporate transactional practices, and labor and employment — a combined 64% of total billable practice hours tracked by Thomson Reuter Peer Monitor — all showed positive growth through November 2019, the latest month of data available prior to the report’s publication. For example, corporate practices and labor and employment grew by 1.4% and 1.6%, respectively.

These practices also saw strong growth in worked rates, with litigation rates growing by 3.9%, corporate rates by 3.8%, and labor and employment rates growing by 3.3%. Among these, only labor and employment lagged behind the market average worked rate growth for all practices of 3.8%.

Rate growth was strong across the various segments of the legal market as well. Among Am Law 100 firms tracked by Peer Monitor, 65% of firms managed worked rate growth in excess of 4% year-over-year. For Am Law Second Hundred firms, 37% percent managed rate growth above 4%, as did 39% of Midsize law firms.

Despite stronger than normal rate growth, realizations against those increased rates did not suffer. Law firms were collecting an average of 89.3% of their worked rates, a pace on par with, if not slightly ahead of other years in the latter half of the decade.

However, law firms would be wise to take these positive findings with a hint of caution. Clients are increasingly exercising their strength to dictate who performs those services and how they are delivered. Indeed, the report points to recent changes from clients, such as i) the growth of legal operations professionals in managing outside counsel relationships; ii) increased use of competitive procurement practices for most major matters; and iii) additional requirements for staffing, billing, expenses, and project management for matters.

The report notes “widespread disaggregation of services as clients have increasingly opted to create virtual teams” comprising outside counsel, legal staffing firms, accountants, and third-party project managers to handle particular projects. The rapid growth of ALSPs, such as the Big Four consulting firms and other non-law firm service providers, is also becoming a major disruptor of the traditional law firm model.

Finally, the report also highlights examples of several law firms taking innovative approaches to competing in this changing environment. From major Am Law 100 firms to more modest Midsize competitors, numerous models are discussed that clearly demonstrate how law firms are leveraging everything from new technology to multi-disciplinary professionals to change how they deliver legal services to their clients.

Bill Josten is Strategic Content Manager for the Thomson Reuters Legal Executive Institute. Bill consults with law firms nationally on issues related to law firm profitability, pricing, and cost recovery.

In previous roles with Thomson Reuters, Bill worked in account management with several large law firms, and as a Reference Attorney. Prior to joining Thomson Reuters, he was an attorney in private practice, an adjunct professor at the University of St. Thomas School of Law, and a clerk at the Minnesota Court of Appeals.

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